Business buyers have an attraction to coin laundries or Laundromats because they are cash business and because they appear to a good part time business. Many clients that I am dealing with have been interested in coin laundries and have brought me financials to review as part of their due diligence. One of my clients had me review, while educating him, on two locations. He then went on to evaluate another 35 locations given what tools I gave him. He has made an offer on one of the two locations we discussed together. It fits all of his and my requirements.
Last week I was thinking about all the people who would like to buy a coin laundry for sale but cannot find one. I got the wild idea that maybe I should build a new location from scratch with all new up-to-date equipment. I then started my investigation into doing this. I thought I would share what I learned from talking to the new equipment distributors.
They suggested that I needed a location that was over 5,000 sf with over 100 machines and this would cost over $1.2 Million dollars or more. His reasoning was that if I had a large location, no one would dare open another new location near my location. When I suggested that I might want to have a small location that would be operating at 80-100% of capacity he responded with, "If you do not have enough machines when your customers come in they will leave and never come back." He was arguing that it was better to have over capacity rather than under capacity. When I mentioned that the industry was down overall he responded with "Some people, not everyone, is down, and that is because they do not advertise and do not know how to run a store."
I am writing this article to warn anyone looking to buy a coin laundry to beware of the following facts.
A. Industry is down from four years ago.
B. If you look at large locations you will see that they usually run at less than capacity.
C. You make profit in this business when the store has a high number of washes per machine. You do not make money having machines sitting idle while the loans have to be paid.
D. The reason the equipment salesperson suggests big locations is so he can sell more machines.
E. A smaller location with reasonable rent and high turnover of washes is going to make more sense than a large location with lots of idle machines.
F. When you own a coin laundry it is important to spend your time on developing advertising campaigns and services that will build loyalty with your customers. 20% of your clients will be moving in a year. 15-20% of your clients have a washer in the building but they still are choosing to come to a Laundromat to do their washing. Most well run Laundromats spend 2% of their gross income on advertising. See how much the Laundromat you are interested in buying is spending.
G. Do not complete the purchase of an existing or a new coin laundry without a knowledgeable third party giving it the once over. Remember that the size of any sales commission is based on the price you pay.
About The Author: Willard Michlin, CPA offers business buyers Due Diligence Services (Second Opinion, Offer Assistance, Final Due Diligence) when they are thinking of making an offer on a business or in the process of investigating a business purchase. Serving all of California. He has written numerous articles on the due diligence process and can be reached direct at 805-428-2063 for more information and an appointment.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Brad Steinberg, Business Broker: Laundromat Specialist
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
|Mike Hurrell, Broker: Coin & Card Laundry Specialist Brokerage
Providencia Properties Inc in association with Golden State Laundry Systems is a full service Coin Laundry Real Estate Broker. At GSLS you will receive personalized attention from our professional staff of coin laundry experts. To sell or buy a Southern CA laundromat call Mike at 310-223-2240 X209.
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Chuck Post: Laundry Buyer Representation, Consulting, Due Diligence
I have 32 years experience in the laundry industry, specializing in assisting laundry buyers with buying or starting up, building, re-tooling, laundries throughout CA. Laundry buyer representation, consulting, due-diligence, lease negotiations, laundry valuations. Contact me at 619-227-5711 Cell.
|Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Helen Yoo, New Century Escrow - Escrow Services In Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Peter Siegel, MBA, BizBen Founder, ProBuy, ProSell Programs
Founder & President Of BizBen.com (since 1994) & BizBenNetwork.com. I am the Lead Facilitator for the ProSell & ProBuy Programs on both websites. I consult daily with buyers, sellers, and intermediaries daily about buying and selling businesses. Call 925-785-3118.
|Larry Larsen: Laundry Consulting, Brokerage, Insurance
I have over forty years of experience in the sales, ownership, management, and construction of coin laundries. He is a licensed broker active in the sale of coin laundries, a licensed insurance agent specializing in coin laundry insurance. Phone me at 714-630-9274 or 714-630-Wash.
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